Thursday, April 07, 2016

India's urban poverty doubles since 1950s, pace of urbanization lower than South Asian countries, China: Study

By Our Representative
In a new study, apparently carried out from a World Bank perspective, three senior economists have said that in the early 1950s, just about 14 per cent of the poor lived in India’s urban areas; however, they note, “by 2012 this had risen to 35 per cent”, adding, “There is a sign of acceleration in the pace of the urbanization of poverty since 2000.”
Giving a slightly different figure in an article based on the study in an online portal, the economists say, “The urban population share has been rising steadily over time in India, from 17 per cent in 1950 to 31 per cent today”.
They simultaneously admit, “India’s pace of population urbanisation (proportionate increase in the urban population share) has been less than either South Asia as a whole or lower middle-income countries as a whole, and markedly slower than for, say, China.”
Titled “Growth, Urbanization and Poverty Reduction in India”, the study has been authored by Gaurav Datt (Associate Professor, Department of Economics and Deputy Director, Centre for Development Economics and Sustainability, Monash University), Martin Ravallion (Edmond D. Villani Chair of Economics, Georgetown University) and Rinku Murgai (Lead Economist, World Bank).
Ironical though it may seem, the economists – taking an approach similar to top World Bank policy makers – observe a “notable change”. They believe, urbanization process, albeit slow, was instrumental in reducing overall poverty (rural plus urban) in the country.
The study has been published by the National Bureau of Economic Research, a think tank with offices in Massachusetts and New York, and is currently being disseminated online by World Bank, which said about it, through a tweet, “Urbanization played an important role in rural #poverty reduction in #India.”
Providing an analysis of the post-1991 period, the cut-off period when Manmohan Singh came up with the new economic policy, “opening up” the economy to market forces, the authors say, “While in the pre-91 period urban growth had no discernible impact on rural poverty, a significant and large impact emerged post-91.”
In their calculations, the economists say, in the post-91 period, “in proportionate terms, poverty incidence declined at the rate of 1.3% per annum.” 
They believe, “Rural poverty measures, that were historically higher than for urban areas, have been converging with urban measures over time, and the (distribution-sensitive) squared poverty gap index for urban India has actually overtaken that for rural India in recent years.”
Thus, they say, what one sees is “a marked urbanization of poverty in India over this period, from about one-in-eight of the poor living in urban areas in the early 1950s to one-in-three today.”
Pointing out that poverty reduction was there because of “a significant spurt in economic growth, driven by growth in the tertiary sector and to a lesser extent, secondary sector”, the economists say, “The pace of poverty reduction also accelerated, with a 3-4 fold increase in the proportionate rate of decline in the post-91 period.”
“Thus”, they add, “Faster growth also appears to have been more pro-poor when the latter is measured by the growth elasticity of poverty reduction.”
“Seen through the lens of growth by output sectors, the contribution of primary sector growth has rapidly dwindled from accounting for about two-fifths of the total poverty decline pre-91 to less than 10 percent of the total (and larger) poverty decline post-91”, the economists say.
“The tertiary sector alone has contributed over 60% of the post-91 poverty reduction. The secondary sector growth has contributed about a quarter. India’s construction boom since 2000 has clearly helped assure a more pro-poor growth process from the secondary sector”, they add.
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Download study HERE

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